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Switzerland-UK relations in the financial sector

Switzerland-UK relations in the financial sector

Switzerland and the UK have enjoyed intensive and multifaceted bilateral relations for many years. Both countries also have leading global financial centres. Because the UK is one of the key mar-kets for the Swiss banks’ export business, it is very important that after the end of the transition period, relations with the UK not only remain as undisrupted as possible, but that they are also deepened in a targeted manner.

After intensive negotiations and several postponements of the exit date, the UK government and the EU reached an agreement in October 2019 on the conditions for an exit on 31 January 2020, including a transition period. In the view of the Swiss banks, the transition period between the UK and the EU should be used to strive bilaterally for an ambitious liberalisation and expansion of mu-tual market access in the areas of banking and investment services.

The sector’s declared objective: extensive liberalisation of market access

  • The UK left the EU on 31 January 2020. Due to the transition period, which, if not ex-tended, will run until 31 December 2020, there will be practically no change in the bilat-eral trade relations between Switzerland and the UK for the time being, as the bilateral agreements between Switzerland and the EU will continue to apply to the UK. Thereaf-ter, a new regime of bilateral agreements between Switzerland and the UK will apply. This regime was established as part of the Federal Council’s “Mind the gap” strategy.
  • There is, however, still considerable potential for deepening cooperation, especially in the financial services industry. The banking sector has declared its objective to be a far-reaching mutual liberalisation of market access after Brexit. This is to be set out in a be-spoke agreement and is to be based on mutual recognition of the respective financial market regulations and supervision. In concrete terms, this would, among other things, allow domestic banks to provide banking and investment services to interested UK cus-tomer segments more easily and in line with their needs.
  • The objectives and principles mentioned above have been incorporated into a joint posi-tion paper which was signed by economiesuisse and TheCityUK at the end of April. The SBA and its members made a significant contribution to this position paper and will con-tinue to coordinate closely with the Swiss authorities, economiesuisse and TheCityUK.

Due to the transition period, which, unless extended, will run until 31 December 2020, there will be practically no changes in the bilateral trade relations between Switzerland and the UK for the time being. During this period, the bilateral agreements between Switzerland and the EU will continue to apply to the UK. For the period thereafter, legal certainty has been created for Switzerland with the “Mind the gap” strategy. The SBA welcomes the fallback measures of the Federal Council to date as well as the bilateral agreements signed with the UK in the areas of trade, insurance, road and air transportation as well as the movement of persons. This new regime of bilateral agreements has made it possible to largely maintain the status quo.

Further liberalisation of Switzerland-UK relations in the financial services industry

The work relating to the “Mind the gap” strategy is ongoing, even after Brexit. As part of these ef-forts, cooperation between Switzerland and the UK – where this is in the interests of both sides – is to be expanded beyond the existing status quo (“Status quo plus”). Because open, liberal markets are one of the objectives pursued in both the UK and Switzerland’s trade policy, the SBA’s stance on the further liberalisation of mutual market access for financial services is positive.

Since there is still a great deal of potential for liberalisation, especially in the financial services in-dustry, it is particularly pleasing from the perspective of the Swiss banking sector that both coun-tries have identified the financial services industry as a relevant area for increased cooperation beyond the status quo after the end of the transition phase. In this context, the approach being pursued by the SBA and its member banks is a broad opening of the markets on the basis of the mutual recognition of the relevant financial market regulations and the supervisory frameworks. In concrete terms, this would allow domestic banks, among other things, to provide interested UK customer segments with banking and investment services more easily and in line with their needs.

The finance sectors and the governments in both countries are in close contact and are already discussing developments in this area. The above-mentioned objectives and principles have been incorporated into a joint sector position paper by economiesuisse and TheCityUK. The paper out-lines concrete asks from government and is supported by around 30 industry associations and financial services institutions in both countries. The SBA and its members are closely involved in these efforts and will continue to coordinate closely with the Swiss authorities, economiesuisse and TheCityUK.